HME Industry Q&A with Doug Francis, Drive Medical

HC: Tell us about the 5 Pillar Solution to help providers confront competitive bidding.

DF: Over the years we have witnessed a steady decline in reimbursement. However, with the recent CMS changes our provider partners are experiencing drastic reductions. Our industry is under attack, and providers are feeling the pinch and being forced to rethink how they run their business. The challenge for the provider doesn’t end with CMS. As the HME industry focuses on the implications of competitive bidding, big-box retailers and Internet providers are rushing into this space. Our data shows that these companies are actually having success selling HME-related items deemed impossible to sell through traditional HME providers. In the past HMEs have been activity based organizations, basically filling prescriptions for what the professional ordered and forgetting about the “front of store” sale that definitely exists. The providers still have an opportunity to capitalize on their unique position to the consumer, but the changes required must happen at every level of their organization.

Drive’s position in the market gives us a unique vantage point of analyzing and learning from high-performing companies that have rebranded, remarketed, changed the way they approach their customers and capitalized on the full lifetime value of them—and in the process, redefined cash flow solutions. Our 5 Pillar Solution combines best practices from high-performing companies into one comprehensive solution only available from Drive. We bring insights, training and sustainability programs to our provider partners to ensure success.

In addition to offering strategies that help providers offset these reductions through operational changes, we offer a line of products called “Competitive Edge.” These products are designed specifically to accommodate lower reimbursement levels by incorporating new manufacturing processes, materials changes and packaging to drive down costs without sacrificing quality. We will introduce several more Competitive Edge products over the next several months, as our existing products in this category have been very well received. Our goal is to be viewed as an extension of our provider partners’ business. Finding ways to be more efficient and effective will help our businesses grow. Because Drive does not sell direct to the consumer, we rely on the strength of our partnerships. That can’t be said by all of the manufacturers in our industry today.

HC: Please expand a little on the fifth pillar, involving the Cash Flow Option (CFO) programs.

DF: Our CFO program is not just a financing program. We begin by helping the provider diversify into a cash model as well as enhancing existing referrals to improve cash flow. This helps to lessen the demand on third-party financing. In the end we realize that hyper growth at reduced margins will eat up capital and we have best-in-class financing options that help our provider partners match their payments to the new reimbursement model so that they can remain cash flow positive while their business grows.

HC: From your perspective, how do you see the HME/DME industry evolving?

DF: The good news for our industry is that nobody was cured simply by reducing  reimbursement. The pie gets bigger every day and there are still plenty of opportunities. Yes, providers will need to take on a model that more closely resembles the retail drugstore model. While a large percentage of revenue will be derived from filling prescriptions, a large percentage of their profits will come from the “front of store” sale.
In this scenario, providers will be able to enhance patient outcomes by providing products that improve their customers’ comfort, safety and independence—things that aren’t reimbursed by the government. As the industry begins transitioning to more of a retail model, manufacturers like Drive will be able to begin offering feature-rich products that have real curb appeal as the consumers that will be using these products will be seeking something that looks less medical or clinical. We have seen this happen in Europe, the UK and Canada. In those markets the government does pay for some of the items; however, if the consumer wants something that looks attractive or offers more functionality, they pay out of pocket. And they pay for what they want, not just what they need.